Audit vs. Review: What's the Difference?
Edited by Aimie Carlson || By Harlon Moss || Updated on August 2, 2024
An audit is a thorough examination and verification of financial records, while a review is a less detailed evaluation ensuring financial statements' consistency and reasonability.
Key Differences
An audit involves a comprehensive analysis of financial records, transactions, and operations. Its primary purpose is to establish the accuracy and authenticity of financial statements. Conducted by external auditors, an audit offers an opinion on the reliability and fairness of the presented financial data, ensuring they comply with accounting standards and regulations. In contrast, a review is a process undertaken to assess the plausibility of financial statements. While it doesn't delve as deeply as an audit, a review ensures the financial statements are consistent and reasonable.
When considering the depth and rigor, an audit is notably more intensive than a review. It necessitates various methods like sampling, testing, and substantive procedures to corroborate financial data. As a result, the outcome of an audit, often encapsulated in the auditor's report, holds substantial weight in the financial and business world.
A review, on the other hand, has a narrower scope. It aims to ascertain whether the financial statements appear free from any significant irregularity. The outcome of a review is a report that offers a conclusion based on the conducted analysis, suggesting if any material modifications are necessary.
Summing it up, an audit and review, while both pivotal in the realm of financial analysis, serve distinct purposes. An audit seeks to verify and validate financial data with a high degree of assurance, while a review aims to ensure the general accuracy and consistency of financial statements, providing moderate assurance.
Comparison Chart
Depth of Analysis
Comprehensive and detailed
Less detailed and rigorous
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Primary Purpose
Verify accuracy and authenticity of financial statements
Ensure consistency and reasonability of financial statements
Assurance Level
High
Moderate
Methodology
Sampling, testing, and substantive procedures
Analytical procedures and inquiries
Outcome
Auditor's report offering an opinion
Report suggesting if modifications are needed
Audit and Review Definitions
Audit
A detailed examination of financial records.
The corporation underwent an annual audit to ensure transparency in its financial dealings.
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Review
A process offering a conclusion on financial data's plausibility.
The review's outcome indicated a favorable financial position for the firm.
Audit
A verification process for financial data.
The audit revealed discrepancies in the company's reported profits.
Review
An examination ensuring reasonability in financial records.
The board requested a review of the financial statements before the shareholder meeting.
Audit
A systematic assessment to establish reliability.
The audit process confirmed the accuracy of the inventory counts.
Review
An assessment of financial statements for consistency.
The annual review found the financial reports aligned with the company's performance.
Audit
An evaluation ensuring compliance with standards.
The external audit checked the company's adherence to international accounting standards.
Review
A lighter scrutiny compared to an audit.
The startup opted for a financial review due to its lower cost compared to a full audit.
Audit
An assurance service offering financial credibility.
Investors often rely on audit results before making investment decisions.
Review
A moderate assurance of financial data's accuracy.
The review suggested no significant anomalies in the quarterly earnings.
Audit
An examination of records or financial accounts to check their accuracy.
Review
To look over, study, or examine again
Reviewed last week's lesson.
FAQs
Who typically conducts audits?
External, independent auditors usually conduct audits.
Is a review as detailed as an audit?
No, a review is less detailed and rigorous compared to an audit.
Which offers higher assurance, an audit or a review?
An audit provides a higher level of assurance compared to a review.
What is the main aim of an audit?
The primary aim of an audit is to verify the accuracy and authenticity of financial statements.
What's the primary outcome of a review?
The main outcome of a review is a report suggesting if any significant modifications to the financial statements are necessary.
Can a review detect fraud?
While a review can identify inconsistencies, it's not primarily designed to detect fraud like an audit.
What is an internal audit?
An internal audit is conducted by an organization's internal team to assess and improve its operations and controls.
Can internal teams conduct reviews?
Yes, internal teams can conduct reviews, but for greater objectivity, external parties might be preferred.
Is a review report equivalent to an auditor's opinion?
No, a review report provides limited assurance, whereas an auditor's opinion, based on an audit, offers a higher degree of assurance.
How frequently should audits be conducted?
Many companies undergo annual audits, but the frequency can vary based on regulations and company policies.
Can an audit guarantee 100% accuracy?
No, while an audit provides high assurance, it doesn't guarantee absolute accuracy due to inherent limitations.
What happens if discrepancies are found in a review?
If a review identifies significant discrepancies, a more detailed audit might be recommended.
How long does a typical audit process take?
The duration varies based on the company's size, complexity, and the auditor's approach, but it can range from weeks to months.
Who sets the standards for reviews?
Professional accounting and auditing bodies typically set standards for reviews.
Are audits mandatory for all companies?
Not all companies are mandated to undergo audits; it often depends on jurisdiction, company size, or other criteria.
What's the cost difference between an audit and a review?
Generally, an audit is more expensive than a review due to its depth and comprehensiveness.
Do all stakeholders value audits and reviews equally?
No, stakeholders might place higher value on audits due to the level of assurance they offer.
Can a company choose between an audit and a review?
Depending on jurisdiction and company type, some entities might have a choice, while others might be mandated to undergo an audit.
Why might a company prefer a review over an audit?
Companies might choose a review for its lower cost, reduced complexity, or when they don't require the high assurance level of an audit.
Are there penalties for not complying with audit recommendations?
Non-compliance can result in penalties, reputational damage, or legal consequences, depending on the nature of the recommendation.
About Author
Written by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
Edited by
Aimie CarlsonAimie Carlson, holding a master's degree in English literature, is a fervent English language enthusiast. She lends her writing talents to Difference Wiki, a prominent website that specializes in comparisons, offering readers insightful analyses that both captivate and inform.
